Alony Hetz raising $375m for US unit Carr

Besides leading the investment by Carr Properties Corporation's own shareholders, Alony Hetz is in talks with Clal Insurance on an investment of $300 million.

Alony Hetz Property and Investments Ltd. (TASE: ALHE), controlled by its CEO Nathan Hetz and the Wertheim family, announced two moves yesterday towards the raising of $375 million (about NIS 1.3 billion) by its US subsidiary Carr Properties Corporation. Alony Hetz holds 49% of Carr. Its partner in the company is US investment bank JP Morgan, along with minority shareholders.

The first move is the raising of $75 million from Carr's own shareholders, headed by Alony Hetz, which took advantage of the only partial participation by the other shareholders to invest $68 million of the total sum, thus raising its stake in the company by 1% to 50%.

Alony Hetz also announced that it was in advanced talks with Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) on an investment of $300 million by Clal Insurance in convertible bonds to be issued to it by Carr. Under the agreement being negotiated, the conversion of the bonds to equity will take place by August 2018, with the conversion option, that will give Clal Insurance 13.65% of Carr, being available to both sides. After conversion, Alony Hetz's holding in Carr will fall to 44%, and that of JP Morgan will be 34%.

Alony Hetz first invested in Carr in August 2013. Together with the current financing round, its total investment in the US company is $700 million. The investment is recorded on its books at $900 million.

Carr owns 16 income producing properties in the Washington DC metropolitan area, with an occupancy rate of 90% by about 300 tenants, and it has four further projects in development, with a budgeted construction cost of $1.4 billion.

In the first three quarters of 2017, Carr's NOI (net operating income) grew 13% to $80 million, and its FFO (funds from operations) rose 18% to $53 million. At the end of the third quarter, its shareholders' equity was $1.6 billion, and its leverage ratio was 43%. It had credit lines of $650 million, $263 million of which were undrawn.

Nathan Hetz said yesterday, "Carr has development plans, and our investment in it is proceeding well, and we plan to continue with it for many more years. If the deal with Clal Insurance goes ahead as planned, it will join the investors in a private company but will not participate in control of the company. Rather this is a financial investment for it, which we hope and wish it will find profitable. The deal with Clal Insurance and the capital raising will support Carr's balance sheet, and raise its shareholders' equity to some $2.2 billion."